Can I Sue My Financial Advisor, Investment Advisor or Stockbroker?

Victims of securities fraud and negligence are entitled to receive damages to compensate them for their losses, as well as other remedies that may be available depending on the specific case. Frequently investors who have lost money in their investment accounts do not realize that they may be the victims of securities fraud and/or negligence on the part of their financial advisor (i.e., investment advisor and/or stockbroker).

Therefore, today we are going to answer the question:

“Can I sue my financial advisor, investment advisor or stockbroker?“

The short answer to that question is:

“Yes, you may be able to sue your investment advisor, financial advisor or stockbroker, if you have suffered losses in your account as a result of their fraud or negligence.”

When do investors sue their financial advisor? In simple terms, people sue their financial advisor when they feel that they have been cheated or misled.

Financial advisors are under a number of duties and obligations by virtue of having a license to sell securities. The firms that they work for are also under specific duties and obligations with respect to what they permit the financial advisors that work for them to do and how they are supervised. These duties stem from the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), as well as both state and federal laws.

So, if you to suffer losses in your investment account because your financial advisor, their firm, or both breached one or more of those duties to you, then you could have the right sue them to recover money. It is important to file a lawsuit as quickly as you can, but always consult a lawyer, even if it seems like it happened a long time ago.

Did my financial advisor break the law?

A financial advisor and their firm have the obligation to provide their customers (you) with full and accurate information about investments they recommend. If a firm or financial advisor provides you with misleading or false information that induced you to buy or sell and investment or did not tell you something important – then you may have a claim for fraud.

Churning is another example. Churning occurs when a financial advisors buys and sells investments over and over in a very short period of time (oftentimes day-trading) in a customer’s account. When this happens, the customer usually loses a lot of money in the account, while the financial advisor “earns” a lot of commissions from the account. A customer who has had their account churned can sue their financial advisor and their firm to recover their losses and refund the commissions the customer paid.

Frequently when churning an account, the financial advisor is also engaged in what is known as “unauthorized trading.” Unauthorized trading is just what it sounds like – trading in a customer account without the customer’s permission. Unless a customer gives their financial advisor what is known as “discretion” (i.e., permission) to trade their account at will, a financial advisor is supposed to get the customer’s permission for every trade they make. If not, then the financial advisor and their firm can be liable to the customer for losses sustained in the unauthorized trades.

Another duty that all financial advisors have to their customers is to make only suitable (i.e., appropriate) recommendations to their customers. Therefore, financial advisors cannot legally make unsuitable or inappropriate recommendations to their customers. For example, if a financial advisor has a customer who is conservative and not willing to risk losing a lot of money in their account and they recommend to that customer an investment that is very speculative (i.e., risky with high upside but high downside, too), that financial advisor and their firm can be on the hook to that customer if and when the investment loses money.

Finally, financial advisors (just like everybody else) are not permitted to forge documents or steal their customer’s money. Unfortunately, financial advisors across the country regularly do both. These financial advisors and their firms can be held liable to reimburse their customers for all money stolen and losses in the accounts effected.

Financial advisors who do “go bad” seem to do so during periods of personal crisis in their own lives – usually when they are going through a rough divorce, facing personal bankruptcy, or battling addiction to drugs/alcohol. While those going through life’s major struggles deserve sympathy and a helping hand, that is no excuse to abuse the trust of their customers as so frequently happens.